[🇧🇩] Banking System in Bangladesh

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ACC seeks responsibilities to investigate reserve heist case

Hackers stole USD 81 million from the Bangladesh Bank reserve during the tenure of the Bangladesh Awami League government. The Criminal Investigation Department (CID) of the police could not complete their investigation in the lawsuit that was filed with Motijheel police station in the city...

en.prothomalo.com

ACC seeks responsibilities to investigate reserve heist case
Nurul Amin
Dhaka
Published: 22 Jan 2025, 21: 09

Bangladesh Bank Collected

Hackers stole USD 81 million from the Bangladesh Bank reserve during the tenure of the Bangladesh Awami League government.

The Criminal Investigation Department (CID) of the police could not complete their investigation in the lawsuit that was filed with Motijheel police station in the city even after nine years.

Now the Anti-Corruption Commission (ACC) wants to investigate the case.

CID has already found involvement of 14 people including former central bank governor Atiur Rahman in the reserve heist incident. The immigration police have already placed an embargo on their travelling abroad.

Wishing not to be named, an ACC official told Prothom Alo that the crime of reserve heist incident falls within the jurisdiction of ACC. The former government of Sheikh Hasina filed a fabricated case with the intention to conceal the incident and gave CID charge to investigate that.

The case was filed with Motijheel police station after 39 days of the incident under three sections including theft.

The official further said the heist mainly took place through hacking but the lawsuit was filed under theft sections. Though there are sections related to hacking, the case was filed in such a way so that the accused could get released even after submitting the charge sheet.

ACC sources said a letter was sent on 31 December 2024 to the CID seeking responsibilities of the investigation. CID received the letter on 2 January but has not yet made any reply.

Of the people barred from travelling abroad, 10 could be identified. They are - former governor of Bangladesh Bank Atiur Rahman, former director of Summit Alliance Port and Institute of Bankers Bangladesh Anisuddin Ahmed Khan lias Anis A Khan, former maintenance engineer of Bangladesh Bank Dipankar Kumar Chowdhury, former deputy general manager SM Rezaul Karim, former executive director Suvongkor Saha, plaintiff Zubayer Bin Huda, former deputy director (SWIFT operator) GM Abdullah Salehin, assistant director Sheikh Riaz Uddin, officer Eklas Uddin and incumbent executive director Mezbaul Haque.

Sources involved with the investigation said Atiur Rahman has left the country even before the court pronounced the order barring him from travelling abroad but the others are staying in the country.

The ACC letter, sent to the CID seeking the case dockets, evidence and other records and documents, requested to handover the case to the anti-graft body.

It said as per section 21 of the CrPC, this investigation falls under the jurisdiction of the ACC as all the people, including the former governor of Bangladesh Bank, involved with the incident are, according to the corruption prevention act and bank company act, public servants.
No CID official, involved with the investigation, however, agreed to comment on the case.

Asked about the letter, ACC director general Akhtar Hossain told Prothom Alo that he did not know this. He could inform this later after inquiring.

On the night of 4 February, 2016, 81 million US dollars were stolen from the reserves of Bangladesh Bank. The criminals resorted to fraud using the SWIFT payment system and withdrew the huge amount of money from the reserves of Bangladesh Bank kept at the Federal Reserve Bank of New York in the United States.

This money went to four accounts at the Rizal Bank branch in Makati City, Philippines, and the money was quickly withdrawn from there. Of the amount, 34 per cent of the money has been recovered. The rest is still deposited in a bank in the Philippines. Bangladesh Bank has filed a case against the Philippine bank in a US court. If the case is won, the rest of the money will be recovered.

Investigation sources said hackers were able to withdraw money from reserve due to negligence in security of SWIFT system. Bangladesh Bank's forex reserve SWIFT (Society for Worldwide Inter Bank Financial Telecommunication) server is a sensitive system. Despite that, then governor approved the connection of Real Time Grace Settlement (RTGS) through the SWIFT and ensured its implementation. The investigators identified this as a criminal move. RTGS is a specialised fund transfer system, through which funds can be transferred from one bank to another instantly.

The investigation also revealed that the then deputy governor-4 Abdul Kashem was against providing RTGS service through SWIFT. As a result, Atiur Rahman himself signed the file for providing RTGS service. Some officials of Bangladesh Bank connived with hackers for pecuniary benefits, though they didn’t get their share after the matter came to light.

Asked, former inspector general of police (IGP) Nurul Huda told Prothom Alo that attorney general should be consulted before transferring the case. The attorney general, who is the top legal officer of the state, can make the right decision considering the fact that if the investigation was done correctly.​

 

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BANKING SECTOR: Legal complexities worsen default loan crisis

The legal framework for handling non-performing loans (NPLs) in Bangladesh has become dysfunctional, allowing wilful defaulters to exploit loopholes and delay repayment, according to a report by the task force on economic reforms...

www.newagebd.net

BANKING SECTOR: Legal complexities worsen default loan crisis
Staff Correspondent 01 February, 2025, 22:55

Representational image. | New Age file photo

The legal framework for handling non-performing loans (NPLs) in Bangladesh has become dysfunctional, allowing wilful defaulters to exploit loopholes and delay repayment, according to a report by the task force on economic reforms.

The report, titled ‘Task Force Report on Re-strategising the Economy and Mobilising Resources for Equitable and Sustainable Development’, was presented by planning adviser Wahiduddin Mahmud to chief adviser Professor Muhammad Yunus on 30 January.

Distressed assets in Bangladesh’s banking sector surpassed Tk 6.75 lakh crore at the end of FY24, an amount equivalent to the cost of 13.5 Dhaka Metro systems or 22.5 Padma Bridges, according to a draft White Paper released in December.

Distressed assets include non-performing loan, rescheduled, restructured, written-off, and litigated loans. The review of the White Paper puts the banking sector on top of the most corruption-ravaged sectors.

With Tk 1,78,277 crore stuck in 72,543 cases as of February 2024, the backlog of cases under the Money Loan Court Act and the Bankruptcy Act has severely hindered efforts to resolve bad loans, according to the task force report.

The Money Loan Court Act, 2003 mandates post-litigation mediation rather than pre-litigation arbitration, making settlements difficult once disputes escalate, it said.

According to the task force report, defaulters have misused this provision to prolong cases, while the requirement for banks to sell collateral before filing lawsuits further complicates debt recovery.

Defaulters usually obtain stay orders from the High Court and delay the course of justice.

The low judge–population ratio and insufficient courtroom facilities have created a bottleneck in resolving NPL-related cases, the report said.

The Bankruptcy Act, 1997, which only applies to individuals and not businesses, leaves major corporate defaulters beyond legal reach.

Over the years, legal reforms have favoured politically connected bank directors rather than strengthening governance.

Amendments to the Bank Company Act in 2018 allowed more family members to serve on bank boards, while a 2023 revision extended director tenures to 12 years.

A major regulatory change in April 2024, through BRPD Circular 07, further weakened accountability by revoking the group default clause, allowing subsidiaries of defaulting business groups to secure fresh loans, the task force report said.

The government’s reluctance to take punitive action — such as freezing bank accounts, liquidating assets, or blocking financial transactions — has emboldened defaulters, worsening the banking crisis, it said.

Access to timely and reliable financial data has also been restricted, creating a lack of transparency, it said.

Since 2018, critical bank-specific data on capital adequacy, asset quality, and liquidity have not been publicly released, while many weak banks have failed to disclose mandatory financial statements under BASEL III standards, the report said.

Arbitrary loan classification changes have further distorted the real NPL situation, often contradicting IMF guidelines, it added.

The crisis, long concealed under regulatory opacity and political influence, came into sharper focus after the mass protests of July 2024, it claimed.

Bangladesh Bank data showed that the NPLs shot up by more than Tk 1 lakh crore to Tk 2,84,977 crore in September from Tk 1,82,295 crore at the end of March.

About 17 per cent of total bank loans — amounting to Tk 16.82 lakh crore — are classified as non-performing, the highest ratio in South Asia.

The defaulted loan figure was Tk 2,11,391 crore at the end of June, Tk 1,45,633 crore in December 2023 and Tk 1,55,398 crore crore in September 2023.

The figure has ballooned by Tk 2,62,737 crore over the past 15 years since 2009, when the Awami League assumed power.

At that time, the total defaulted loan stood at Tk 22,240 crore.​

 

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FID undermines Bangladesh Bank autonomy

Economists in a latest task force report have blamed poor leadership and the Financial Institutions Division for the erosion of the Bangladesh Bank’s autonomy.

www.newagebd.net

FID undermines Bangladesh Bank autonomy
Mostafizur Rahman 02 February, 2025, 00:22

Economists in a latest task force report have blamed poor leadership and the Financial Institutions Division for the erosion of the Bangladesh Bank’s autonomy.

They observe that poor leadership at the central bank over the past 10–15 years, coupled with the formation the Financial Institutions Division under of the Ministry of Finance in 2010 by the now deposed Awami League regime, has significantly diminished the central bank’s independence.

The observation was revealed in a document titled ‘Task force report on re-strategising the economy and mobilising resources for equitable and sustainable development’ presented by planning adviser Wahiduddin Mahmud to the chief adviser, Professor Muhammad Yunus on January 30.

The report was prepared by 11 renowned economists and other experts.

The establishment of the FID in 2010 introduced dual regulation of the banking sector by Bangladesh Bank and the FID, the report said, observing that the presence of dual regulators exacerbated governance failures instead of strengthening oversight mechanisms.

The move to establish the FID contradicted the Bangladesh Bank (Amendment) Act, 2003, which granted the central bank autonomy over its operations, monetary policy formulation and implementation, the report stated.

The FID’s mandate itself reflects how it undermines Bangladesh Bank’s sovereignty, according to the report.

It holds the authority of ‘administration and interpretation of the Bangladesh Bank Order, 1972, and the orders relating to specialised banks as well as matters concerning the state-owned banks, insurance, and financial institutions.’

By assuming this role, the ministry of finance effectively established its control over the central bank’s governance, the report noted.

Following the FID’s establishment, banking sector governance significantly deteriorated.

Bank licences were granted based on political considerations, non-performing loans surged, and regulatory oversight weakened.

In 2013, the government approved the establishment of nine private commercial banks despite widespread concerns over their economic justification.

Referring to a study, the task force report mentions that 95 per cent of banking officials believed these banks were unnecessary.

The Bank Company (Amendment) Act, 2013 mandates that new commercial banks should be licensed based on economic necessity and prevailing financial conditions.

But in Bangladesh, political influence has outweighed economic rationale in bank licensing, the report says.

Over time, bank licences have increasingly become tools for embezzling public funds, the report highlights.

Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, told New Age that there was a conflict of interest between the roles of the Financial Institutions Division and Bangladesh Bank, adding that their responsibilities should essentially be separated.

He suggested that the central bank should function as a constitutional body, accountable to the parliamentary standing committee.

He emphasised that the focus should not be just on empowering the central bank, but also on who was leading it.

Mahbubur underscores institutional reforms to establish a proper structure for the central bank.

The right person must be appointed to lead Bangladesh Bank, with transparent mechanisms in place, including clear eligibility criteria and job descriptions for the governor and deputy governors, to ensure accountability, he stressed.

M Masrur Reaz, chairman of Policy Exchange Bangladesh, states that while the central bank has never enjoyed full autonomy, its independence was completely eroded during the 15-year rule of the Awami League-led government.

He criticised the Awami regime for undermining Bangladesh Bank’s independence, citing undue influence from the head of government and the finance minister.

Reaz emphasised the need for the government to evaluate and strengthen institutional mechanisms to minimise political interference and the influence of powerful business groups.

He also stressed that the accountability of the central bank governor should be ensured through oversight by a more independent body, such as a parliamentary standing committee, to safeguard the institution’s autonomy and integrity.

The taskforce on economic reforms suggests strengthening loan sanctioning processes, depoliticising bank boards, upholding Bangladesh Bank’s independence and enacting legal reforms to address deep-rooted governance issues, enhancing transparency, and ensuring financial stability.

‘In order to remove dual regulation and stop political influence the MoF’s FID should be shut down. The functions of the FID can be performed by the Bangladesh Bank,’ according to the task force report.

The government repeatedly recapitalised state-owned commercial banks burdened with high non-performing loans, allocating Tk 15,705 crore between FY2008–2009 and FY2016–2017, the report further said, adding that these bailouts failed to improve these banks’ financial health.

Political encroachment was also evident in the appointment of Bangladesh Bank governors.

Under the previous government, these appointments became politicised, prioritising the ruling party’s interests over public welfare.

This directly violated the Bangladesh Bank (Amendment) Act, 2003, which states that ‘No person shall hold office as governor or deputy governor who is a member of the legislature, a local government, or employed in any capacity in public service.’

Despite this legal restriction, the previous government appointed a career bureaucrat as Bangladesh Bank governor, further eroding the institution’s independence.

Political interference also extended to coercion and forced resignations.

On January 5, 2017, intelligence agencies abducted senior officials of Islami Bank and forced them to resign.

The same year, businessman S Alam Group secured control over seven private commercial banks, leading to their financial distress.

Shariah-based banks, in particular, faced severe liquidity shortages after their takeover.

The governance crisis was further exposed by the 2016 cyber heist, in which international hackers stole Tk 679.6 crore from Bangladesh Bank’s treasury account at the Federal Reserve Bank of New York.

Despite the magnitude of the breach, no central bank officials were held accountable.

Instead, efforts were made to suppress the issue, with the Criminal Investigation Department deferring its investigation report for the 80th time as of October 2024, said the report.​